tv Boom Bust RT November 23, 2017 3:30am-3:58am EST
and in the case of american united you're not even going to be able to bring on your normal full size carry on bag if you're buying one of these fares the idea is to make the travel experience more difficult with these fares in hopes that you'll spend more money for the things that used to get included in your ticket. will basic economy fares from all accounts you know were essentially created to compete with these budget airlines spirit frontier. things of that nature they're offered a rapidly growing number of people use them especially young fliers i've noticed when i'm on them anyway no frills carriers they basically call themselves if you look at the prices spirit airlines cost of fare per cent per mile is six frontier airlines up to nine express jet. about seven sky west it goes on up delta. american united those are some of the highest so do
you think they're actually going to be caught out by customers in trying to do this due to the add on prices because they're not really a budget carrier. well what they're basically have been doing is they've been matching the lowest fares offered by their competitors and in the past when they did that they were offering a better value product than those competitors offered what they wanted to do is say ok we're going to offer those lowest fares but we're going to offer as unpleasant a product as you would get on a spirit a frontier or an allegiant when we do so that you spend more what they're not doing is offering lower fares than before they're taking the existing lower fares and trying to make those less desirable as a way of effectively offering a fare increase for those who are willing and able to pay more for the younger travelers people who are more price sensitive are simply going to stick with those lowest fares and get less than they did before alternately you know what you've got
is a business model that's not really what you normally expect you're usually you expect to have businesses that are trying to offer more value at a lower price but in this case they're trying to increase the price by offering less value it's a little bit of a challenge and in fact in the rollout that united had they acknowledge that they lost nearly one hundred million dollars in their initial attempt and the reason that united was losing money when they started doing this is simply because other airlines weren't doing it also so when they matched the price of american airlines or a southwest american and southwest offered a better value product american hadn't begun their base your economy initiative yet so their bet is that now that american is offering the economy fares also they will be losing money but consumers do have a choice as we say southwest doesn't offer these fares neither does jet blue or alaska so when one of those carriers is a competitor in the market for your business you're actually going to get
a better deal at the same price. would you say this might be sort of a wait and see period for the airlines the holidays are coming up a lot of people in the air could this sort of be a beta mode for for these programs where we might see modifications after the holidays well so delta has started rolling out their basic economy fares in two thousand and twelve it's now across the system delta merican and united rolled them out this year and they've rolled them out broadly we have them now i do think that there is going to be some customer confusion especially as you have the once a year travelers traveling over the holidays because while it's really clear if you buy a ticket on an airline web site exactly what the restrictions are and what's going to happen people who buy it through online travel agencies don't always have as clear an expectation that said so there will be more confusion at the gate people who bring those carry ons and they're not allowed to have them they'll be facing penalties a lot of more on happy customers that's certainly something that we face because as
i say depending on where you buy your ticket your understanding of the terms and conditions will vary tremendously do you see a possible rollback of this trend or at least an increase. in benefits to those buying basic economy take its because it seems like a bit of a gamble if you're competing against what is known as a budget airline that doesn't even have first class or business class in it and then your one of the major airlines and you're competing against that it seems as if you better keep your options open for rolling that back at some point if you're a little gamble doesn't work off work out. well for lindsay funny of the one of the best values in travel is actually spirit airlines offers they don't call it first class but they have something called the big front seat that maybe about thirty bucks more it's literally just the bigger seat not the other benefits southwest in particular is actually the largest carrier of domestic passengers and they not only don't offer a basic economy where you can't bring
a carry on bag they don't charge you for your checked bags or even have change fees so they do use it is a gamble delta has had the longest and says it does contribute to their profits it works but not nearly to the extent that united and american have told investors to expect it to to benefit their bottom line i don't expect it to be rolled out there fully daryn committed but i certainly think that it's an opening for competitive business models you know southwest and it's a real opportunity on the west coast for alaska virgin america and that combination as they continue to merge to frankly offer a better product than the largest carriers and hopefully one consumer business well some people might say look a better product would be more space in the cabin and if you want to charge me for you know charge me a higher price to check a bag that's fine but a nine hour flight hertz and the airlines it's getting tighter and tighter and tighter we've talked about it before on the show do you see that may be changing.
well it's certainly the case so you know american airlines has said they're going to offer only thirty inch pitch in their new seven thirty seven max aircraft that's the distance from seat back to seat back and it's less than the current thirty one that they they and delta offer an economy and that's less than the thirty two that you're going to generally get on southwest so the seats are certainly closer together united just made clear that on their boeing triple seven they're going to join much of the rest of the world and have instead of nine seats across the cabin we're going to have ten seats like american does today so it is kill the case that airlines are doing what they call densification which really just means more seats in the same amount of space and by the way they also squeeze in seats not just by shoving them closer together but even by reducing the size of the lavatory so many inputs now in just planning your vacation it doesn't even matter if you're just bringing a backpack thank you so much for helping us out on those we've got to bring you on
again to talk about this growing problem in the united states gary left chairman and c.e.o. of miles and points consulting and the founder of you from the wing dot com thank you thanks lindsey. the internet has disrupted just about every industry but it significantly changed the way we shop our chief correspondent trinity trial has has more on that from new york brick and mortar stores are closing out an epic pace putting the retail business at risk for the most store closures this year than ever before leaving many wondering what the future of shopping looks like. advancements in technology have made it easier for brands and customers to analyze and share information which is changing the retail landscape drastically but with the rise of the supersized eat taylors like amazon and e bay more and more brick and mortar stores are having trouble competing so i think that their role is definitely changing right so it's not it's no longer sort of the of a constraint that where people have to shop right because almost anything as i. online
now according to fung lobel retail and tech a total of nine thousand four hundred fifty two stores will be closed this year because the shift to online retail and other retail bankruptcies that beats out the previous all time high of six thousand one hundred sixty three stores closing during the financial crisis in two thousand and eight it's just easier to go ahead and. find what you want online from the stores that you like in order and get it sent to your door rather than going in trying stuff on the side and have time it's easy to go through different options and choices in prices in places online obviously from my couch or desk and many say that amazon has been the force behind the explosion of online shopping and according to forbes is now the third largest retailer in the world. yet wal-mart still holds the number one spot last year wal-mart's sales totaled in at four hundred eighty three billion dollars compared to amazon's one hundred thirty six billion but well wal-mart's online revenue
summed up to a whopping fifteen billion dollars amazon was a staggering ninety billion but with the holidays just around the corner retailers are doing all they can to capture every dollar. whether it's customers walking through the door. or customer clicking on their website for example many stores are listing lower prices in store for some online products to drive traffic into the locations or the store sold out of a particular item for a customer and order it online right then and they're still generating revenue for the same company yet experts say that the brick and mortar stores are still an essential component to overall company success so the presence of online the online channel is drawing a lot of consumers creating a lot of competition for the offline store so drive traffic however i think that the offline bricks and mortar stores your main and essential component of. driving purchases and millennial generation zeke roups agree while many of these younger
consumers like to spend their free time online rather. in watching television both groups actually prefer in-store to digital shopping according to a two thousand and fifteen global study by c.b.r. a group out of thirteen thousand people between the ages of twenty two and twenty nine years old seventy percent of them prefer to do their shopping at brick and mortar stores and in some instances those who did most of their shopping online preferred to go into the store for big purchases if i'm going to make a really substantial purchase for anything i'm going to want to check it out in person i'm going to want to touch it feel it compare it talk to somebody that knows about it going to a store for that but if it's like you know random thing the. threshold for money or something like that i'll just go and buy it online although it seems that brick and mortar stores are underperforming experts say retail locations now play a crucial role as an apartment source e-commerce not only allowing them to compete with amazon but also serve as additional distribution centers and pick up slots for online orders a center for returns and an opportunity to offer face to face customer service
reporting and your turn of the job as our take. day with us because next we'll hear from author and behavioral economist dan ariely on why we spend the way we do to be right back. to. the village of collect she has been nicknamed sleepy hollow because for some unknown reason its local residents have formed victim to sleep with him. chose to move. over there has been if she. could have seen that simple things in the sort of but also go on the list. to go
there more due to the position. to switch. from where did you do what we have are doing to. this with. the washing machine the first. on my cylinder did your boss tells you of the guts to. do it the first. day everybody from stephen ball. to hollywood guy. every proud american first of all i'm just george bush and r.v. news this is my buddy max famous financial guru well just a little bit different. with all the drama happening in our country and i'm
sure the good have fun every day americans. closely start to bridge the gap this is the great american people. simply. set up have ten miles from now to the independent with meters for that day with. a less impact the council as a placenta i went up at a sauna we were meeting they. were sort of my love and respect and i think that me or the here now with jamie as a hunk on the road. now it's a bad thing. because hell i got money for that matter i. see like him
they make the rule you have the authority and the marriage will have controlling crucial gave up because of me it is a season when i lose. my . between free shifting and major sales there's a lot of ways we justify spending the money we make but how do marketing tactics get to us so easily to talk more about this we spoke with dan ariely author of dollars and cents how we missed think money and how to spend smarter in his book he mentions how j.c. penney once attempted fair and square pricing which didn't work out so well cost in the retailer almost one billion dollars and then tells lindsay why take
a look but what happens is we have to think about how do people our sister value how do we decide what something is is worth and the reality is it's very hard it's very hard to look at the like a piece of clothes and say how much is this is worth so what do we do we look at relative value relative to what relative to past prices so if something used to be to cost one hundred twenty dollars and it's now seventy it looks like it's great a great deal if you just seventy what do we compare it to not very clear so j.c. penney for a long time had this relative comparison everything had a high starting point in the low discounted price and people have said to themselves not in explicit way this is amazing value let's get it once the prize was just fair and the regular price but without these high reference price people could not assist the value in the same way they couldn't figure out whether something is a good deal or not and they basically bought much much less now it's kind of an
interesting thing. that you can think about it is a mistake on one hand right if something used to cost one hundred twenty it's now seventy why is it a better deal than if it used to cost eighty but on the other hand it also says that it's really hard for us to evaluate things in a general way and we need help we rely on cues and your wrist ticks and different strategies to help us figure out what something is worth worth and there's lots of cues like that another another example is the question of fairness imagine you come to visit me i live in durham in north carolina you come to visit me and you park and you look for a quarter in your in your pocket for the parking meter and you don't have a quarter and i pass by and you say hey do you have a quarter and i said yes i have a quarter i'll sell it to you for a dollar most people say i'm not interested i'm not going to spend a dollar for a quarter and take my chances with the parking authority but think about case
number two the same thing you can you park you stop you don't have a quarter i stop buying you say excuse me do you have a quote and i say i don't have a quarter but there's a bank five blocks down the street if you want i'll run down fast as i can i'll come back and i'll give you quarters but if i run all this distance for you how do you feel about giving me a dollar now you feel very happy giving me a dollar now in every possible way you were soft you have to wait for a few minutes you get sweaty coins but why are you happier because there was effort involved. so many times we think we assess the value of what we get the reality is we use all kinds of irrelevant cues what was the used to record prize how much somebody runs for us in those things help us figure out how much you're willing to pay for something that kind of explains why people who earn their money versus people who were handed their money have a different idea of the value or in the appreciation of that what should we be cautious about this mechanism the free shipping mechanism we see by retailers free
shipping but there is the surcharge on top of that that we don't see to circumvent the loss for the free shipping. yes absolutely so imagine the following case imagine sell you something small and does shipping and together they cost five dollars in one case i say this shipping is free the thing itself is five dollars in the second case i say that each other to fifty in the third one they say this thing is free shipping is you have some pretty interesting explanations we need to create rules for a one k. self-control something that's kind of hard to find right now if it goes so much great but great read dan ariely professor and author of dollars and cents how we missed think money and how to spend it smarter. for the holidays were inundated with trend forecasts for retailers all over the world and one place to learn about
that is that c.e.o.'s and bell which is like a preview of the annual consumer electronics show take a look at what holland cook most of the big picture learned when he attended the exhibit in new york. beginning to look a lot like christmas in new york where we got the big download yesterday from the consumer technology association who every year at this time releases research on the big holiday spend which is about a third of all the usa tech spend this is a two hundred ninety two b. billion dollar industry just in the states and one hundred seventy million of us are going to drop ninety six point eight b. billion stuff under the tree the batteries did not come included with every parent's worst nightmare absolutely starting stuff about a battery that's actually a very good idea. what it can just ask men versus women it is spending what on one
is not a false stereotype because how much never and let's just be on a depends on who you are that will spend more than women if you've got kids you'll spend even more and if you're an early adopter the seat. research says you go up a notch and they're going to be buying drones and alexa like crazy and the demographic sweet spot for this industry is thirty five to fifty four so that's who's big on tech this year ok so it's people who were using tack i would say you know before it became sort of this millennia old thing couple decades before on into the people who started using it in college so people have got a longer time span with it and they're more comfortable with it now it's mainstream think about you know left your phone at home or you do when you turn it's unthinkable not to have that when i can't handle it you couldn't do it i can tell you right now i rack up what are some of the things that are hot items that that we've seen in the forecasts i mean they're collecting data all year long it's got to produce something now surprisingly while we expect to see the shiny objects like
drones big and that will be one of the top ten gifts you know the number one gift people want for christmas this year is a t.v. that's not now and we all replaced our t.v.'s during that digital transition in two thousand and nine but these new four k. smart t.v. you're right with the world who and all of that the prices have fallen i can't imagine how best buy has a margin left but that's the number one gift the number two gift we want laptops think about it smartphone number three and we have a new one coming out the line is snaking around the apple store just to get your name on a list so a lot of the old stuff is what people want the new version of for christmas i have a hunch about that do you think that's the birth of netflix and even apple t.v. and things like that have people's t.v. from being plugged into cable television do you think that's fed into this you know the cord cutters are driving the cable guy or insider in the nuts and the cord for
years the one who have dropped their premium channels because amazon netflix spending big bucks to create original programming nobody loves their case. company except for internet access so the genie is out of the bottle and the networks are now trying and h.b.o. are now trying to catch up to the dot com t.v.'s yeah they've got a totally flip around what are some of the things that really stood out to you when you were there the. tech or not shopping habit has changed we used to talk about black friday it is now black november the door buster special you were talking about this now ten years ago we probably wouldn't be here already has an ancient cyber monday ten twenty years ago as a novel we already shop for paper towels online gift shopping is not a big leap interestingly that day and between small business saturday there's big business behind it it's being funded by amex because they're trying to gain favor
with the retailers who resent the commish and they're trying to get back into their good graces and they're providing support material and videos and other tools for the mom and pops the small business saturday best buy is a product that comes with a story and the shopkeeper will convey the story to you so that when you present this gift so thoughtfully it comes with a story but if you want to t.v. you're at a big box yet no gear you're absolutely you're not going to go get a carrot and television now and we're buying online like crazy don't loiter estimates eighteen to twenty one percent even more than last year which was huge increasingly on a smartphone and i thought one of the data points that just jumped off the powerpoint yesterday at this briefing was that people are now asking a lex where the door buster specials are that's scary because alexa can find your stuff online but then they're asking her if they actually want to go outside their
front door yeah and increasingly shoppers are as we say on our t. america questioning. because same day delivery is huge. and they want to know the return policy and you're better off for free returns and free shipping it was just better what if you noticed about black friday itself with regard to staffing and hours because some people are doing this hey after you finish turkey dinner i know skip turkey dinner come shopping and other people are saying no we're going on it's just wrong you know wal-mart the country's biggest retailer is going to open it a minute after midnight thanksgiving morning and you know that there's going to be people all bundled up in lawn chairs like an event from happening and then they're going to trample each other when the doors open but america's biggest mall the mall of america is being minnesota nice they're not going to open on the holiday so it's kind of a chick fil a is being closed on sunday they're making a statement only took place i was making a statement on what your opinion on the old school versus the new school of black
friday shopping approaches i ask everybody that's do you think we should keep it traditional and keep the employees home shut the door they'll come in the next morning i buy a stack of whatever i think the thoughtful book is for half a dozen friends and clients but i still want to go to the mall yes still want to feel the hustle and holiday bustle and all go into good diver and get a stack of those for appropriate people because i would feel as though i missed it if i didn't go shopping it's an event it really is thank you so much for input on this holland house a big picture and. that's all for now be sure to catch boom bust on directv on the our t.v. channel one you missed that's on directv catch us on you tube at youtube dot com slash boom bust our team thanks for watching the next time.
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